Goldman Sachs Boosts S&P 500 Target to 6,900 Points on Rate Cut Hopes

Goldman Sachs has raised its 12-month target for the S&P 500 index from 6,500 points to 6,900 points, while maintaining its forecast for an 11% return over the next year. This adjustment comes as the investment bank anticipates a more aggressive and earlier interest rate cut cycle by the Federal Reserve, coupled with robust fundamentals in large-cap stocks, particularly in the technology sector.

The revised target reflects a series of upward adjustments in the bank's return forecasts. The three-month return forecast has been increased to +3%, corresponding to an S&P 500 target of 6,400 points. The six-month return forecast has been raised to +6%, with the index target moving from 6,100 points to 6,600 points. The 12-month return forecast remains at +11%, with the index expected to reach 6,900 points.

Goldman Sachs' optimism is driven by several key factors. The bank expects the Federal Reserve to commence a rate-cutting cycle in September 2025, with potential reductions of 25 basis points in each of the following three meetings. This move is anticipated to enhance market liquidity and boost risk appetite. Additionally, large-cap stocks, particularly in the technology sector, are expected to maintain strong earnings growth, providing a buffer against cost pressures and supporting overall index performance.

The macroeconomic environment is also seen as improving, with the probability of a U.S. recession decreasing to 35% and core PCE inflation expected to slow to 2.3%. The easing of trade tensions further supports the stock market's upward trajectory. This adjustment reflects Goldman Sachs' positive outlook on policy shifts and corporate earnings, with a greater emphasis on the short-term impact of rate cuts compared to its May forecast, which had a 12-month target of 6,500 points.